tv Nightly Business Report PBS February 22, 2012 6:30pm-7:00pm PST
to go. >> this is erika miller in new york. gasoline prices are hurting many household budgets, but will they also hurt the u.s. recovery? i'll have the story. >> tom: u.s. businesses could soon pay a lower tax rate. the president wants to overhaul the corporate tax structure, hoping to help manufacturers. but will it be enough? it's "nightly business report" for wednesday, february 22. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: captioning sponsored by wpbt >> susie: good evening, everyone.
encouraging and disappointing news from hewlett packard tonight. it announced better-than- expected earnings after the market close, but tom, it expects modest growth in the upcoming quarter. >> tom: susie, that's one reason shares slipped in after-hours trading. let's run down h.p.'s numbers. the company earned 92 cents in its fiscal first quarter, a nickel more than analyst estimates and down considerably from last year. there were two big disappointments, though. revenues fell 7% to $30 billion, lower than expectations. and susie, looking ahead, h.p. said earnings for the current quarter will come in shy of what had been expected. >> susie: joining us with more about h.p.? micahel holt, senior equity analyst/technology at morningstar. hi, michael. so what was your reaction to both the quarterly numbers and the outlook? >> well, it's a bit of a
relief that they are actually meeting the goals they've set. we have to keep in mind that this was a lower bar, lower guidance and it reflects the challenging position the company is in and some of its key business units. >> susie: the new c.e.o. took over just five months ago in a situation with a management shakeup, and a struggling company. what's your sense of where things are now, in terms of a progress report? i know she was on the conference call with you a short while ago talking to all the analysts. what was your sense if hul it packard is on the right track? >> it's a challenging situation for the printing business and services business. but the sense that meg whitman is conveying is that she's much more in control over and aware of where the problems are, and has a plan to tackle those. still asking for a leap of faith that the next couple of quarters will be bumpy and that it's going to be a long multi year transition, but we like that they are setting goals and that they upheld
their full year earnings status. >> susie: looking over the past quarter seemed like almost every area that hewlett pack ward was in was weak, whether you're talking pc's or -- do you think they should rethink the businesses that they're in? >> i'm not sure that exiting the businesses is what makes sense at this time. they dangled the p. c. segment out on the market a couple quarters ago and that turned out to be a big mess and created some head winds for right now. what we're really keying on is what are the temporary head winds and what are the permanent head winds. so the printing business, how much damage has been done though that business and what can happen in the future to turn things around. >> susie: investors have been patient with this stock, it took a big hit over the summer, it's beginning to pick up although it was down today in the regular session and after hours. you've got a $40 target on the stock, it's 28 now. what do you think? >> i think there's a lot of up
side for investors, but don't expect an overnight change, it's a long slow turn around and we expect a slow crawl in the share price to reflect investor confidence returning as they continue to set and meet their goals. >> susie: any disclosurees to make, do you own hewlett pack yard? >> no, no disclosures. >> susie: thanks for coming on the program. we've been speaking with michael >> tom: a lackluster day for u.s. stocks, despite home sales showing more strength. the dow fell 27 points, the nasdaq lost 15 and the s&p was off 4.5. the losses came despite reports of fresh strength in the housing market. sales of previously owned homes rose 4.3% last month. the jump was well above what economists were expecting. and the supply of homes on the market is getting back to a more normal reading of six months' worth. megan mcgrath is a senior analyst at m.k.m. partners, where she covers homebuilders.
so, meghan, improving home sales. is it sustainable as we move into the spring sell season? >> yes. we absolutely think that it is sustainable. we're forecasting about 9% growth in existing home sale this is year, and a little bit better even in new home sales. so today's reaction i think was a little bit of high expectations, catching up with reality. and the reality is that things are getting better, they're just getting better at a pretty moderate pace. so if we take out some of the choppyness from the month to month numbers and that was also a problem today, home sales were up about 2%, versus the prior month. so we're making progress, it's just very slow progress. >> tom: before i ask you about one particular home builder, any sense that the pace could pick up as we move into the warmer months? >> it has been picking up the last couple months so we saw it flat and then up a bit, and up 2% this month. so we're making slow progress and this has been a is there part of the year.
we are starting to hear from some of our contacts that things are picking up in certain geographys. a few are starting to look better, so there's hope. >> susan: you mentioned toll brothers, let's take a look at the earnings it did release today. it was a disappointing because it was a rut, not an earning, it actually lost money when it was expected to make money, but also delivered fewer homes, saw more home piers cancel their contracts in its fiscal first quarter. is that a worrying trend? >> yes, so the interesting thing about toll, they lost about two pennies and we were looking for a two-penny gain. so a slight miss there. we're not that concerned about the cancellations, they did pump up a little, but they're still pretty good about 6%. the interesting things for toll earnings was their backlog conversion rate droped and that's the number of homes they closed versus the orders they had in the pipeline. that dropped to the lowest number we've seen since january of 2009. the company atributed that to their high rise business, that
those towers are closing at a slower pace mostly in the new york metro area. than previously. so the good news there is it's not a, not -- they are expecting two unit to start closing sales in the next quarters so, that conversion rate should lift. >> tom: some optimism there for toll brothers. do you own shares yourself? >> we do not. >> tom: meghan mcgrath, a home building analyst with mkm partners. >> thank you. >> i expect top line to grow, i expect profitability with respect to margins to increase, and i expect this to be driven by sales force expansion. so, i feel good about the future. >> susie: still ahead, tupperware's c.e.o. tells me about what's cooking in the kitchen. making u.s. companies more competitive and bringing jobs back home. that's why the obama administration wants to overhaul the corporate tax code. today's proposal closes many loopholes and eliminates tax
breaks for oil and gas producers. it also cuts the effective corporate tax rate on manufacturers to no more than 25% and drops the top corporate tax rate from 35% to 28%. but, as darren gersh reports, one of the administration's most controversial ideas is a minimum tax on the profits u.s. companies make overseas. the white house argues the president's push for a minimum tax on overseas corporate profits will help level the international playing field, leading to a tax code that supports manufacturing at home. >> that takes away the incentive to relocate overseas and reverses that and creates incentives for companies to insource again in the united states-- a trend that the president believes is very important to our economic future. >> reporter: under current law, u.s. companies can put off paying taxes on their overseas profits until they bring that money back to the united states. in practice, that means a lot of the overseas profits u.s.
companies make are never taxed. even so, alex brill, an economist at the american enterprise institute, thinks the minimum tax is a mistake. he says the tax code should make it easy for businesses to invest wherever they need to, at home or abroad. if u.s. businesses succeed overseas, brill says they will have more resources to invest everywhere. >> ultimately, that's going to result in more manufacturing jobs, more research jobs, more accounting jobs, here in the united states. >> reporter: there is growing bipartisan agreement on capitol hill that the u.s. needs to lower its corporate tax rate to keep up with other countries that have been lowering rates on corporate profits. deloitte tax expert clint stretch says the president's minimum tax sends the wrong message to the most competitive u.s. companies. >> they care about where they're taxed and how much they're taxed. and the president has really moved in the opposite direction where the political conversation's been going. so, it's going to give them pause. >> reporter: which may explain the cool reception the
president's tax framework received from business today. the administration crafted its plan to guarantee manufacturers operating at home face an effective tax rate of no more than 25%. but even manufacturers were not happy with that. >> the president recommends that manufacturing be at a 25% rate, and that's average. i don't think we've become the great country we are today because we've strived to be average. i think we've got to come down much farther. we have to pick a rate that makes us competitive around the world. >> reporter: the white house has not said where it wants to set the minimum tax on overseas profits. senior administration officials described the president's proposal as a framework to help start negotiations. darren gersh, "nightly business report," washington. >> tom: corporate taxes are just one issue affecting the economic outlook. another big worry? rising energy prices. drivers are paying an average of $27 more for gasoline a month than they did a year ago. and as erika miller explains from new york, that threatens an economy that has been gathering strength.
>> reporter: many people are wondering if gas will pass $4 a gallon, but in new york, california, and many other coastal states, gasoline is already well above that level. if you live in the heartland of america, don't gloat. $4 gas may be coming to you too. the american automobile association predicts gasoline prices could top $4.25 nationwide by the end of may. that would top the record, $4.11, hit in july 2008. the catalyst is rising crude prices, which have surged to a nine-month high due to heightened tensions around iran's nuclear program. >> the potential disruption of oil flow from the persian gulf-- that adds more fuel to the fire, and that gives all the financial speculators all the ammunition, if you will, to push crude oil prices higher. >> reporter: the surge in gasoline prices comes as the u.s. economic recovery finally seems to be picking up speed, and job growth is improving. but many worry the economy is still not healthy enough to
withstand $4-a-gallon gas. retail expert craig johnson calculates oil currently accounts for 6.2% of consumer spending. he says that's slightly above the tipping point for recession. >> what will happen is a month from now, people will find they have less money in their pocket, less money in their checking account than they thought they did, because they have been spending an extra $40 or $50 a week on gasoline. that's a lot of dough. >> reporter: to be clear, johnson thinks oil prices would have stay elevated for several months to cause serious harm to the economy. but he predicts many consumers may soon change their shopping habits. >> for people shopping at middle-tier retailers, they may well have to trade down to the wal-marts, and then the dollar folks. >> reporter: even under the best circumstances, gas prices tend to rise in the spring. more people start traveling, and some refineries switch from winter-blend gasoline to a more expensive summer formula.
erika miller, "nightly business report." >> tom: the rise in pump prices hasn't derailed the strong stock rally since last october. in fact, the energy sector has been one of the hottest areas of the market. tonight's "street critique" guest is looking for more profits in energy stocks. she's hilary kramer, author of "the little book of big profits from small stocks." always great to see you, miss kramer. are you buying at the top if high prices get cured by perhaps lower demand? >> i'm not really worried about any slower demand. as far as i'm concerned the oil prices are going to continue to rise. tom, the situation in the middle east with iran and cutting off exports to france and to u. k. concerns about israel coming in and potentially trying to take out their areas of the nuclear development in iran are very, very serious, weighing on the market. oil stocks keep going up, but the other companies, that is a
problem, and it is a concern. the other sectors like transportation. >> tom: absolutely and we've seen that turn around lately. your choice is occidental petroleum, otherwise known as oxy. it's above $100 per share. what do you expect out of it? >> at the very least, i expect oxy in the 300 range to go back to a high of $117. you have a 2% dividend yield here, the really strong well managed diversified oil company with hundreds and hundreds of acres, especially in california, a strong hold in the basin area and it's cheaper for oxy than it's ever been before, on extraction, the technology is really important as many of these companies are now drilling in areas where there is shale formation, which is really said men taer rock, and take a look at the backin region in
north dakota, with billions of barrels, it's just a matter of reaching them and oxy has to resource it. >> tom: a quick viewer question, hank asks, i own bank of america. do you still like bac, it was back in november of last year you mentioned it was below six, tonight close to eight. would you still put your money to work? >> if you have a five-year time horizon, absolute on bank of america. and the valuation is low at 8.8 times tangible book. but there's a lot of overhang, even with some behind bank of america. don't be there for the short term. long term. >> tom: did do you own the shares? >> i own bank of america, i do not own oxy. >> tom: you our guest this evening, from hillary kramer. thanks, hill rather. >> thanks, tom.
range over the past year, as this latest rally has stalled out for now. the biggest drags on the broad market were the financial, telecom and technology sectors. hewlett-packard threatens to keep tech in the red after its disappointing outlook late today. shares lost another one percent after its earnings release and forecast. fellow computer maker dell led the sector lower with its almost 6% drop. the selling came after dell reported a drop in its quarterly earnings last night. a day after reaching an agreement on greece's next bailout, a drop in the eurozone's business activity this month hurt financial stocks--- even regional banks. the dallas-based comerica bank and insurer hartford shed more than 4% each. co-merica's fall came after an analyst at stifel nicolas advised clients to take profits from its recent three-month rally. suntrust out of atlanta dropped more than 3.5%. for the second session in a row the world biggest retailer led the losers among the dow
industrials. sellers were back at it again in shares of wal-mart. the stock fell another 2.5% today. that's after an almost 4% fall yesterday on the heels of its quarter earnings report. trading volume in w-m-t has been four times normal on this move down, from a 52-week high hit last week. one other note from retailing, women's store limited brands fell 4% in after-hours action, below its closing price. while earnings were stronger than anticipated, its outlook was well below estimates. limited is the parent of such brands as victoria's secret and bath and body works. gold heated up thanks to some late day buying, but it was enough to push prices to their highs of the year. gold rallied almost $13 an ounce, with traders pointing to the usual set of worries out of europe and some technical support around 1750 an ounce. gold hasn't traded over $1800 an ounce since november. gold has been finding buyers as the dollar index has stabilized. usually gold and the dollar trade in opposite directions, but worries about europe have helped both gold and the dollar.
the dollar index was up a fraction today. speaking of dollars, it is tax time, and tax software prep maker intuit is sitting at an all-time high tonight. that comes after a 6% rally today. intuit is taking more market share from competitors after the firm reported stronger-than anticipated earnings yesterday. this is the company behind the turbo-tax and quickbooks accounting software. and that's tonight's "market focus." >> susie: just about everyone knows the tupperware brand-- the company famous for those plastic storage containers. but what you may not know is they are bright and modern looking, and the company now sells kitchen appliances, baby products and beauty supplies. and those famous tupperware parties have spread to more than 100 countries. today, 90% of the company's business is in europe, asia and latin america. only 10% in the united states. business is strong, with sales jumping 12% last year.
so why is tupperware still going strong after 50 years? that's what i asked c.e.o. rick goings. >> we changed the product line and went into all new categories of different products, where we didn't used to compete. we changed the tupperware party, so that it's relevant for younger working women today, so there's a social attraction to it. we changed the career program so a lot of young women who want to become entrepreneurs and don't want to live at their career in a cubicle, she'll come to us because she can become a real business leader. srz it's interesting how strong sales are outside the united states. why is tupperware such an tracks in china and brazil and india? where business is just booming. >> well, what you have happening in india, in indonesia and brazil is a growing middle class who wants high quality. so what they do is they move past the commodity products,
to a product like ours and they're very proud to have our products in their house. as a matter of fact in the philippines somebody was recently telling me you can pawn tupperware. so it's a source of pride. they display it like trophys. >> susie: you do a lot of business, about a third of your sales come from europe. how difficult is it given the financial crisis there? >> we continue to do well there. you're getting a more entrepreneurial spirit in europe right now. you have some saying the government can't take care of you, you're going to have to find other ways. and you're seeing this pent up desire to, wait a minute, kid make more if i do more. so that serves their needs. when there's higher unemployment there's a bigger recruiting pool for us. and also, when they're cutting back, people tend to stay more at home and find more cost efficient ways by preparing
food themselves. >> susie: how is the consumer doing, when are their attitudes on spending whether you're talking about the united states or europe or china? >> there's one theme we continue to see, a quest for quality. i know many companies used to look to be low cost supplier. we don't believe that's the -- it's build brands that people have confidence in. we guarantee our products for life, and in these countries where there's a growing middle class, they're jumping to us. india, for example, where we've been 17 years, we were up 70% last year. ditto indonesia was more than 50%. >> susie: so in serms of hiring what's your outlook for hiring this year? >> as consumers want to buy more of our products we've got to make more products, and that means we've got to build out in our factories, more machines. at the same time, we're recruiting more sales force, we'll recruit 7 to 10% more,
you know, this year. so that leads to a very big number. we're already at 2.7 million sales force. so you really start to expect at least another 100 to 150,000 this next year. >> susie: rick, thank you so much and good luck to you. >> thank you. >> tom: in recent months, the job market has shown signs of life again, but wages haven't. tonight's "money file" is looking for a big win for your paycheck. here's ramit sethi, author of "i will teach you to be rich." >> in our entire lives, we make a few decisions which determine whether we're financially secure or not. i call these big wins, because they dwarf any concerns about whether to spend $3 on our daily lattes. one of the biggest wins is finding our dream job-- one that we enjoy and pays us what we deserve. i recently spent the last two years studying how tens of thousands of people searched for their dream jobs. one of the most startling findings was how many of us are being underpaid.
in my research, i found that people were often underpaid by $10,000-- $20,000-- and they had no idea. knowing how much you should be paid is a valuable tool in any salary negotiation. to find out what your salary should be, visit salary.com and payscale.com. you can use the data, along with classic negotiation techniques, to make your case for a raise. will this work for everyone? of course not. but you might be surprised by the results. even in this economy, companies know that they've spent thousands recruiting and training you, and they don't want to lose top performers. while others worry about minuscule $3 purchases, i encourage you to focus on the big wins. how big? a single $5,000 raise can be worth $1 million over the course of a career. i'm ramit sethi. if you're ready to ask for a raise or negotiate for a new job, ramit has a script you can follow. you'll find it on nbr.com. here's what's on tap for tomorrow:
we'll see new claims for jobless benefits from the past week-- from kohl's to target to the gap-- a number of retailers report earnings, and apple meets its shareholders. the company sits on a mountain of cash and shareholders are calling for a dividend. >> tom: that's "nightly business report" for wednesday, february 22. i'm tom hudson. good night everyone, and goodnight to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org